Someone will be getting a haircut

My DW had her haircut yesterday, so she talked to her hairdresser. Turns out, the lady has an interest only mortgage, a.k.a. very expensive rental from a bank, $600K, and a house that is basically in tear-down condition. She figures, it needs another $600K of work. So, she was wondering what they should do... Funny, ha? Oh, both her and her husband are self-employed, so they would only qualify for an Alt-A mortgage. Did I mention that she has 2 babies, and a used BMW? She does own her own 'business', but I doubt she makes more than $100K.
Part of me wants to feel bad for these people, but then again, I can't be sincere in it. They'll get what they asked for. It used to be that you get eaten by animals if you were not smart - now, it is just loosing your shirt and mind.
The party continues. The stock market stopped falling, temporarily, but I expect the real deal to start in October.

On another note, my in-laws were in town last weekend, so I've flipped through a used-house salesman publication, and I found my new real home of genius (sorry, Dr. Housing Bubble, I hope you won't mind), that I have to share:
A 2007-built, 2 bedroom, 2 bathroom townhouse, in the industrial area of town, 30 yards to the 101 freeway. Price - $2,000,000 :-). That is $1,000,000 per bedroom. I think this developer is a little late to the party, don't you?
The picture of the winner is shown above - now, the location is what really matters - note the freeway and different industrial facilities around:

DC used up his nine lives

Big news is that DC did use up his 9 lives - they bought a 1923 row-house on Capitol Hill. Price paid close to $600K, 2 bedroom, one bath, with a couple of sunrooms, and another bedroom/bath unit in the basement. A back yard, lawn, and no garage.
I am really glad for them, since their mood was getting just too difficult to bear. The move in date will be early September, the loan is supposed to be secured (interest rates did go up .25% due to the piercing of the credit bubble). So, I suppose there is no going back. We'll see how it will turn out.

CoolAid is still popular around here...

Well, I ran into a neighbor the other day, he was asking how our move (to a bigger apartment) went, so I sensed he wanted to be asked about the news.
They bought a house!!! And, they were able to secure funding despite the current credit crunch. A 3 bedroom, 2 bath, I figure they paid ~$800 000, and that they will need to spend another $40K to make it decent.
Besides being individually rich, I just do not see their math works out: he is a young lawyer, and in our town, it would be hard to imagine that he could be making more than $100K at this stage. Let's be generous, and assume $120K. His wife is a part-time admin worker/mother of a baby, so that is another $15K. They own two new Volvos, that is $1200/month. The house, unless they took some crazy loan, should cost about $5K+ (including insurance, property tax and tax deduction). So, it seems that their monthly available cash is ~ $1800. 2 adults, a kid, no retirement savings and no college fund. I know, a lot of people live with that much, but to me, this just does not compute.
A funny thing is that the guy made a serious comment:"Well, now we just have to pray". "For what?", I asked. "That the prices do go back to the previous level over the next few years".
Sounds like a lousy ARM deal to me...

Brainwashing is a powerful concept...

I ran into an acquaintance at the store today. We started chatting, and I told her that DW and I spent the whole weekend moving (that is right, we moved to a new rental apartment, $2300 for a beautiful, new 3 bedroom, 2 bath, with washer and dryer hookups, a large patio etc.)

She asked me, all optimistic - "Oh, did you buy something?" My reaction was -" Of course not, in this market". Her answer -"Ah, you are going to wait for it to double again?" ?!?!?!

That just blew my mind, and I did not know what to say. I mean, what is there to say after such a ridiculous statement. And from another educated (engineer) person.

Of course, she and her husband own a house (probably really own, they bought it 20 years ago or so), and as such are disconnected from the reality. I would like to think that if I were in their shoes, I would have sold it last year (both of their kids are in college). But, it is easier to think that you are a paper millionaire, and still rationalize why you need to stay in your house, and how the prices are going to keep increasing. Human psychology is a strange thing - even though you are making these 'paper' gains, the loss to follow will hurt as if you actually lost the money...

Oh, another news is that DC lost yet another bid for another ghetto lair in DC. This would be offer number five. I wonder when their incredible luck will run out, and when one of these offers will go through? We'll see if you get 9 lives in the real estate bubble as well...